Using a Volume-Based Overhead Rate Based on Machine Hours to Assign

question 78

Multiple Choice

Using a volume-based overhead rate based on machine hours to assign manufacturing overhead to a product line that uses relatively few machine hours is likely to:

• A)Overapply overhead to the product line.
• B)Underapply overhead to the product line.
• C)Understate direct labor costs.
• D)Overstate direct labor costs.
• E)Either over- or under-apply overhead to the product line depending on many other factors.

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Definitions:

Rationalization

The application of economic logic to human activity; the use of formal rules and regulations in order to maximize efficiency without consideration of subjective or individual concerns.

Social Identity Theory

A theory of group formation and maintenance that stresses the need of individual members to feel a sense of belonging.

Teamwork

The collaborative effort of a group aimed at achieving a common goal or completing a task in the most effective and efficient way.

Shared Social Identity

Shared social identity is the sense of belonging to a specific group or community, which influences one’s feelings, actions, and interactions with others within the same social category.